SAN JOSE, Calif. ( TheStreet) -- Cisco ( CSCO) will start paying a dividend this fiscal year, as the networking giant finally bows to pressure from shareholders.

"At our annual Financial Analyst Conference today, we outlined our intention to issue a dividend during the current fiscal year ending July 30, 2011," explained Cisco in a statement on its Web site Tuesday. "Size and timing of the dividend will be determined in the coming months, taking into consideration tax policy and broader market conditions."
Cisco

Cisco, like Apple ( AAPL), traditionally steers clear of dividends, preferring to pump money into acquisitions and share repurchase. CFO Frank Calderoni, however, recently confirmed with TheStreet that a dividend would happen.

Shares of Cisco surged 73 cents, or 3.43%, to $21.99 in response to the company's announcement, far outpacing the modest advance in tech stocks that saw the Nasdaq gain 0.41%.

In the past, Cisco's shareholders have voted down recommendations for a dividend, likely thinking that the payment would stymie the company's growth. With Cisco firmly established a as networking behemoth, however, the mood in San Jose has changed. In late 2008, Cisco CEO John Chambers said that he would pay a dividend to shareholders before stepping down from his role. Despite today's announcement, though, there has been little indication that Chambers is going anywhere soon.

There are precedents for the shift towards dividends. Software giant Microsoft ( MSFT) reversed its stance and made its first payment in 2003. Microsoft shares also surged this week following chatter that the company is looking to sell debt to support a higher quarterly payout and ramp up repurchase activity.

Apple, however, remains a dividend hold-out. The iPad maker stopped paying dividends in 1995, preferring to focus on growth at a time of stiff competition from the likes of Microsoft. Fast forward 15 years and Apple sits astride a vast pile of cash. With $45.8 billion in cash and investments on its books, some investors have recently been calling on Apple to share the wealth.

Dividends, in addition to rewarding investors, are seen as a good way for companies to stabilize their share price. Cisco, however, must offset these benefits against the pressures of competing in new markets against the likes of IBM ( IBM) and Hewlett-Packard ( HPQ), not to mention heightened competition from traditional rivals such as Juniper ( JNPR) and Alcatel-Lucent ( ALU).

--Written by James Rogers in New York.

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